Defence Secretary Liam Fox warns over 'new nuclear arms race'

Defence Secretary Liam Fox today warned of the risk of a "new nuclear arms race" as he defended the renewal of Trident as the most cost-effective way of maintaining Britain's deterrent.

The Defence Secretary was speaking just hours after Chancellor George Osborne made clear in public for the first time that the Ministry of Defence will have to bear the full cost of replacing the UK's ageing nuclear submarines from within its core budget.

His decision represented a bitter defeat for Dr Fox, who was engaged in a behind-the-scenes battle with the Treasury over the costs of renewing the deterrent, which was traditionally funded from outside the MoD budget.

The Defence Secretary warned earlier this month that it would be "very difficult" to maintain the MoD's other capabilities if it was required to fund the estimated £20 billion capital cost of four new subs.

Although the cost would be spread over several years, experts estimate that it could consume up to £1.5 billion of the MoD's £36 billion annual budget at a time when savings are being demanded.

But Mr Osborne left no doubt he rejected Dr Fox's pleas, telling Bloomberg: "All budgets have pressure. I don't think there's anything particularly unique about the Ministry of Defence. I have made it very clear that Trident renewal costs must be taken as part of the defence budget."

The development sparked speculation that the MoD may be forced to scale back Trident, perhaps by cutting back to three subs.

Speaking to Metro newspaper, Dr Fox warned against complacency over the need for Britain to maintain its deterrent.

"Should Iran become a new nuclear weapon state, Saudi Arabia, Egypt and Turkey would be likely to follow suit and we could see ourselves in a new nuclear arms race," the Defence Secretary warned.

"There are a lot of real dangers out there and I'm not sure people have really focused on them."

He played down suggestions that the like-for-like replacement of the ageing Trident subs planned by the previous Labour administration represented an extravagant use of public money.

"Gordon Brown and Tony Blair didn't choose this particular programme because it is the most expensive," he said. "They chose it because they thought it was the most cost-effective way of maintaining Britain's nuclear deterrent in the first half of this century."

Reducing the Trident fleet to three subs would put extreme pressure on the UK's policy of keeping one nuclear missile-armed craft at sea at all times, said Dr Fox.

"At current levels of technology, it is very hard to manage a continuous deterrent with three submarines rather than four," he explained.

The MoD received some protection in the autumn spending review - being ordered to draw up plans for cuts of between 10% and 20%, compared with the reductions of 25% to 40% facing most other departments.

But the concern within the armed forces will be that other projects will now have to be axed if the MoD does have to pay for Trident renewal at a time when it is already facing swingeing cuts.

Professor Malcolm Chalmers, of the Royal United Services Institute, said the MoD was already looking at whether it could afford two new aircraft carriers for the Royal Navy and new fast jets for the RAF, as well as considering Army manning levels.

"This increases the pressure to look at the timetable for Trident renewal," he said. "Delaying that timetable for five years would substantially lighten the pressure on the defence budget up to 2020."

The Scottish National Party called for Trident to be scrapped to preserve funding for the rest of the armed forces.

"Absorbing Trident into the core defence budget is unsustainable and would have a devastating impact for spending on conventional forces, which are already overstretched," said defence spokesman Angus Robertson. "The implications of this decision could not be more serious."

And Mr Osborne's decision was condemned by Commons Defence Committee member John Woodcock, Labour MP for Barrow and Furness where the submarines would be built.

"This decision will add to concern over the wider defence and security review that the Government is hell-bent on cutting budgets with a speed and brutality that is simply not in the country's long-term interests," he said.

But Dr Fox today said the blame for any pain should be laid at Labour's door.

"They left orders to which there was no money set aside," the Defence Secretary told Metro. "Now the sky is black over Whitehall with the sight of chickens coming home to roost. Here at the MoD we are having to make cuts to Labour's unfunded projects.

"There will be some increased investment in some areas but the economic train crash we inherited will inevitably mean reductions in other areas."